The Indie Hacker's Guide to EU VAT

1. What is VAT and Why Should You Care?

VAT (Value Added Tax) is a consumption tax that applies to most goods and services sold in the European Union. It's similar to US sales tax, but with one crucial difference: it follows the customer, not the seller.

If you sell a SaaS subscription to someone in France, France wants its VAT — regardless of whether you're based in Ireland, the US, India, or anywhere else.

This is called the "place of supply" rule for digital services, and it's been in effect since 2015. It means that as an indie founder selling SaaS, you can't ignore EU VAT just because you're small or based outside the EU.

2. Do I Actually Need to Charge EU VAT?

It depends on three things:

1. Where are YOU based? (EU, UK, US, or elsewhere)
2. Where is your CUSTOMER? (which EU country)
3. Is your customer a business (B2B) or a consumer (B2C)?

Here's the quick decision tree:

• B2B sale (your client has an EU VAT number) → Reverse charge applies. You charge 0%. Your client handles the VAT.
• B2C sale, you're in the EU, under €10K cross-border → Charge your home country VAT rate.
• B2C sale, you're in the EU, over €10K cross-border → Charge the customer's country rate. Register for OSS.
• B2C sale, you're outside the EU → You must charge the customer's country rate. Register for Non-Union OSS. No minimum threshold.

3. The 5 Scenarios You'll Actually Hit

As an indie founder, you'll encounter these cross-border tax situations repeatedly. Here's exactly what happens in each one:

Scenario	VAT Rate	Invoice Wording
EU → Same Country (e.g. Ireland → Ireland)	Your local rate 23%	"VAT 23%"
EU → Other EU (B2B) (e.g. Ireland → Germany, business)	0%	"Reverse charge — Article 196 VAT Directive"
EU → Other EU (B2C, under €10K) (e.g. Ireland → France, consumer)	Your home rate 23%	"VAT 23%"
EU → Other EU (B2C, over €10K) (e.g. Ireland → France, consumer)	Customer's rate 20%	"VAT 20% — France (OSS)"
EU → Outside EU (e.g. Ireland → US)	0%	"Outside scope of EU VAT — export"

4. The One-Stop Shop (OSS) — Your Best Friend

Before OSS existed, if you sold to consumers in 10 different EU countries, you had to register for VAT in all 10 countries and file 10 separate returns. Nightmare.

The One-Stop Shop (OSS) fixes this. You register once in your home country (or any one EU country if you're from outside the EU), file a single quarterly return, and it covers all 27 member states.

There are two versions:

• Union OSS — for EU-based sellers. Register in your home country.
• Non-Union OSS — for non-EU sellers (US, UK, India, etc.). Register in any one EU country. Many founders choose Ireland or the Netherlands.

How OSS works in practice:

1. Register for OSS in one EU country
2. Charge each customer the VAT rate of their country
3. File one quarterly return listing sales by country
4. Pay the total VAT to your OSS country — they distribute it to the other countries

5. Reverse Charge Explained (B2B)

The reverse charge is the simplest scenario and the one you'll use most often if you sell to other businesses.

How it works: When you sell to a business in another EU country that has a valid VAT number, you charge 0% VAT. Your client "reverse charges" the VAT — meaning they account for it on their own return. It's a wash for them (they charge it and deduct it in the same return).

The rules:

• Your client MUST provide a valid EU VAT number
• You MUST verify it using the VIES system (we built a free checker)
• Your invoice MUST state "Reverse charge — VAT to be accounted for by the recipient under Article 196 of the VAT Directive"
• Keep proof that you checked the VAT number

6. What to Write on Your Invoice

The legal wording on your invoice matters. Tax authorities can reject invoices that don't include the right language. Here's exactly what to write for each scenario (or read our complete cross-border invoice guide with 7 detailed scenarios and templates):

Domestic sale (same country):
"VAT [rate]%" + your VAT registration number

Cross-border B2B (reverse charge):
"Reverse charge — VAT to be accounted for by the recipient under Article 196 of Council Directive 2006/112/EC." + your VAT number + client's VAT number

Cross-border B2C (OSS):
"VAT [rate]% — [Country]" + your OSS registration number

Export (outside EU):
"Outside the scope of EU VAT — export of services"

7. VAT Rates by Country (2026)

Here are the standard VAT rates for digital services across all 27 EU member states as of 2026. For a more detailed breakdown including recent rate changes and country-by-country analysis, see our complete EU VAT rates guide.

Country	Rate	Country	Rate
🇦🇹 Austria	20%	🇱🇻 Latvia	21%
🇧🇪 Belgium	21%	🇱🇹 Lithuania	21%
🇧🇬 Bulgaria	20%	🇱🇺 Luxembourg	17%
🇭🇷 Croatia	25%	🇲🇹 Malta	18%
🇨🇾 Cyprus	19%	🇳🇱 Netherlands	21%
🇨🇿 Czech Republic	21%	🇵🇱 Poland	23%
🇩🇰 Denmark	25%	🇵🇹 Portugal	23%
🇪🇪 Estonia	22%	🇷🇴 Romania	19%
🇫🇮 Finland	25.5%	🇸🇰 Slovakia	23%
🇫🇷 France	20%	🇸🇮 Slovenia	22%
🇩🇪 Germany	19%	🇪🇸 Spain	21%
🇬🇷 Greece	24%	🇸🇪 Sweden	25%
🇭🇺 Hungary	27%	🇮🇪 Ireland	23%
🇮🇹 Italy	22%

Hungary has the highest rate (27%), Luxembourg the lowest (17%). The EU-wide average is around 21.5%. Use our cross-border tax calculator to get the exact rate for any country combination.

8. The 5 Most Common Mistakes

Mistake 1: Ignoring VAT until you get a letter

Tax authorities are increasingly sharing data across borders. The EU's DAC7 directive now requires payment platforms to report seller data. Stripe, Paddle, Gumroad — they all report your sales to tax authorities. It's not a matter of if, but when.

Mistake 2: Not verifying VAT numbers

Your client says "we're a business, don't charge VAT." But if their VAT number doesn't pass VIES validation, you're liable for the VAT. Always verify the number before applying the reverse charge.

Mistake 3: Charging the wrong rate

Charging your home rate when you should be charging the destination rate (or vice versa) creates a mess. Use the calculator every time until the rules are second nature.

Mistake 4: Missing the €10K OSS threshold

You've been happily charging Irish VAT at 23% on all your EU B2C sales. Then you hit €10,001 in cross-border sales. Now you should have been charging destination rates for that last sale — and potentially everything after. Track your running total.

Mistake 5: Wrong invoice wording

A reverse charge invoice without the correct Article 196 reference can be rejected by your client's tax authority. They'll come back to you asking for a corrected invoice. Use our invoice generator to get it right automatically.

9. Your Action Plan

Here's what to do right now, depending on where you are:

If you're just starting out (< €10K EU sales):

1. Register for VAT in your home country (if required by local threshold)
2. Charge your home country rate on all EU B2C sales
3. Use reverse charge for B2B sales (verify VAT numbers)
4. Track your EU cross-border sales total — act when it approaches €10K
5. Use correct invoice wording from day one

If you're growing (> €10K EU sales):

1. Register for OSS (Union or Non-Union depending on where you're based)
2. Switch to destination-country VAT rates for B2C sales
3. File quarterly OSS returns
4. Consider using Stripe Tax, Paddle, or LemonSqueezy as volume grows

If you're outside the EU (US, UK, India, etc.):

1. Register for Non-Union OSS in one EU country
2. Charge destination-country rates on all B2C EU sales
3. Use reverse charge for B2B (get client's VAT number)
4. File quarterly through your single OSS registration

This guide is for informational purposes only and does not constitute tax or legal advice. Tax rules change frequently. Always consult a qualified tax professional for your specific situation.